Outsourcing key to start-up success, says DealDey CEO

“It is not about doing everything yourself. You cannot do everything yourself. You should not do everything yourself.”

So says Kehinde Oriola, CEO of the Nigerian daily deals website, DealDey. The company was launched in 2011 and is loosely based on the Groupon model, offering promotions and discounts on everything from restaurant meals to spa treatments, and a variety of other services, events, courses and products.

Speaking at the annual AfricaCom event in Cape Town this week, Oriola said that when the company first started, it tried to manage every aspect of its business operations. It owned its own delivery vehicles, employed its own drivers, and ran its own warehousing. Until about a year ago, it employed around 500 people.

But this model proved unsustainable. While the purpose of DealDey owning its own logistics was to reduce costs and improve customer experience, the opposite happened. Deliveries the company had promised to make within five days would take 15 days. Warehousing and delivery costs were high, and this was passed on to customers. Oriola believes the problem stemmed from DealDey trying to focus on aspects of the business in which it lacked expertise.

“What that meant was we were having management meetings about how many vans do we have, how much of our equipment has been spoiled, how many spare parts are missing, how many vans are not working – rather than having more strategic conversations on how to run the business,” he explained.

“When something isn’t your core [expertise], you end up spending a lot of money trying to do it. If it is not my core to manage a logistics platform, what happens is I find out that two of my vans have been sitting somewhere for a while and nothing is happening to them… Or my riders are not as efficient as they could be. So it ends up being a lot more expensive for me to deliver.”

Simply getting products from merchants to the warehouse before delivering them to consumers drove up costs and wasted time.

It was for these reasons that Oriola and his team decided to change their model and outsource logistics and warehousing to third-party companies with expertise and experience. DealDey could then focus on its core proposition: sourcing and providing deals on its platform, and adding value to the lives of its consumers.

The company now has around 60 employees and has managed to reduce its delivery costs from ₦1,500 (US$5) to as low as ₦300 ($0.95) by using third-party drivers to collect and deliver products directly from merchants to consumers.

Oriola says the lesson here for other start-ups, especially in the e-commerce space, is to begin by outsourcing and doing something well, rather than trying to do everything and failing to deliver on the core proposition.

“You can’t do everything yourself, so you need to actually partner.”

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